When it comes to arbiters of morality and integrity, we look
toward the Ten Commandments, our parents and -- in a strange and
largely unnoticed new trend -- the corporate behemoths that issue
our credit cards.
American Express, MasterCard, Visa and Discover as enforcers of
community standards, individual decency and commercial honor?
In recent years and rarely at their pleasure, credit card
companies and the banks that issue credit cards have found
themselves bridging the legal voids left by regulatory agencies and
politicians. Amid pressure from customers, consumer advocates and
others who have no place left to turn, credit card firms have felt
compelled to cut off the financial lifeblood of those working in
the margins of respectable commerce.
Online gambling firms. Web-based gun merchants. Purveyors of
legal marijuana for medical or even recreational use. Leakers of
secret and sensitive government documents. And, most recently, the
operators of shadowy websites that charge people to remove online
All have had to curtail or even terminate their activities when
credit card issuers and banks stopped processing what some people
consider morally questionable financial transactions.
"These topics have definitely been of interest as of late," said
Sanette Chao, a spokeswoman for American Express.
Only game in town
The credit card companies are so large, so crucial to modern
enterprise, that they should not be permitted to act as an arbiter
of moral right and wrong, said one representative of a cut-off
"In an online environment, credit cards are one of the only ways
of paying," said Joe Centrich, a Texas lawyer who represents two
mug shot websites that have come under fire from people whose
images appeared on the sites -- and have been cut off by the credit
card companies. "You take away the ability to process credit cards
from a business and that business has a very short life span."
Others welcome the intrusion.
"When the credit card companies become aware that there is an
identifiable large-scale extortion ring operating through its
systems ... they should act to curb it," said Scott Ciolek, an Ohio
lawyer who won a settlement on behalf of people who had trouble
getting their mug shots removed from the websites represented by
Centrich. "Otherwise, these companies all become knowing
"When it comes to noncriminal uses like the purchasing of
firearms, legal marijuana and gambling, the credit card
companies have the right to deny usage, but not an obligation as
they would in the case of illegal activity," Ciolek said. "But,
moreover, those companies have to consider the effect of their
involvement and determine if it's something they wish to involve
their business, employees, stockholders and families in."
These decisions are difficult for credit card firms, and they
are fraught with complications regarding the loss of revenue, the
potential for legal action, the risk of becoming embroiled in
political controversies, and the possibility of angering large
numbers of customers.
Credit card companies say they carefully weigh their
responsibilities when these issues are brought to their attention.
Among the factors they must consider: the legal standing of the
business. How widespread and damaging the reported abuses might be.
The potential legal liability to the card issuer of acting -- or
not acting. The point at which a credit card issuer's right to
decide who and who not to do business with might cross the line
In general, though, the card companies prefer not to discuss the
specific rationales for each decision or, in many cases, even their
general philosophies regarding the trend.
"We cannot get into the details of our decision process," said
Chao, the American Express spokeswoman. "Our decision to prohibit
or allow the use of American Express cards for various industries
is purely a business decision or, in the case of marijuana
transactions, guided by federal law."
MasterCard spokesman Jim Issokson said the card issuer's
guidelines are clearly stated and "require our customers to conduct
lawful activity where they are licensed to use our brands," he
Matt Towson, a spokesman for Discover, said, "Unfortunately, I
am unable to muse on the current environment." Representatives of
Visa did not respond to several requests for comment.
Legally, card companies appear to be covered. The user
agreements they craft for credit card holders, authorized users,
merchants and payment processors give the card issuers and their
affiliated banks the right to restrict and define the use of the
Consumer advocates say they're glad to have the help, but they
doubt that the card companies are acting altruistically.
"I don't believe these decisions are strictly being made on
moral grounds," said David Jones, president of the Association of
Independent Credit Counseling Agencies. "These banks are very
interested in their bottom lines, their image with customers, and
their insulation from lawsuits, especially class-action
"In the current hyperlitigious, class-sensitive environment,
everyone is afraid to take a stand on anything," Jones said. "After
all, these banks are profit-making businesses, striving to please
their stockholders and fend off the regulators. In my opinion,
that is the motivation, despite the appearance of moral
Whatever the motivation, the number and type of incidents
involving the severing of credit card and debit card relationships
continues to grow.
Mug shot removal services:
In one of the most recent cases involving card issuers and matters
of commercial morality, MasterCard, Visa, American Express and
Discover now are refusing to process payments to firms that remove
-- or claim to remove -- arrest photos published on a proliferating
number of "mug shot" websites.
Scores of such sites now regularly search law enforcement
websites and download and publish mug shots of people recently
arrested -- but, importantly, not yet convicted or exonerated. Then
the sites wait for the inevitable reaction.
Thousands of people are shocked and alarmed to find the
provocative and reputation-damaging shots easily within view of
relatives, friends and current or potential employers. What to do?
Often the answer is to pay hundreds or even thousands of dollars to
operations that offer to have the mug shots removed. Some of those
operations appear closely related to the websites that publish the
photos in the first place.
Many observers consider this as something akin to extortion, and
the credit card companies -- along with PayPal, where accounts
often are funded by credit cards -- recently decided to decline
doing business with most mug shot removal operations.
"For mug shot removal sites, when those sites are brought to our
attention, we conduct a detailed review and cancel as appropriate,"
said American Express' Chao.
"We do not accept transactions for mug shot removal services,"
said Discover's Towson.
Ciolek, the attorney for aggrieved people whose arrest photos
are now on very public display, approved. "By severing connections
with the mug shot firms, the credit card companies and affiliated
banks eliminate the motivation to move forward with the enterprise
and, over time, the hardship will bring the for-profit mug shot
companies to an end," he said.
Centrich, the attorney for two mug shot websites, sees it
differently. "It's really quite disappointing to me," he said.
"There are only a few of these financial institutions -- it's
really an oligarchy -- and they've decided they just don't like
this kind of business."
Though the sale and use of marijuana for medicinal purposes is
rapidly being approved around the nation -- and Colorado and the
state of Washington have legalized pot for recreational use -- most
credit card companies still
refuse to process transactions regarding pot
They say the legal environment remains too blurry, and they fear
violating federal banking and drug laws that remain in effect.
"American Express continues to prohibit the use of the card for
marijuana sales," Chao said. "It is our policy to adhere to federal
law in such matters."
MasterCard's Issokson said the issue already is complex and
seems to be getting more so. "When it comes to the marijuana issue,
we're facing a situation where there's an inconsistency between
federal and state laws," he said. "As such, we're now seeking
guidance from the federal government.
"In this instance, the federal government considers marijuana
sales illegal, but is currently not challenging state laws that
legalize marijuana sales," Issokson said. "Given the complexity of
this situation, we will continue to seek guidance and inform
merchant acquirers of any new developments."
Visa, on the other hand, seems to be softening its stance,
saying it will defer to the rules and wishes of each bank or other
entity that issues its cards. "In offering our payment service,
Visa adheres to the rule of law and seeks to prevent our network
from being used for unlawful purposes," the company recently told
The Denver Post.
"In this instance, the federal government considers the sale of
marijuana illegal, but has announced that it will not challenge
state laws that legalize and regulate marijuana sales," the company
told the newspaper. "Given the federal government's position and
recognizing this is an evolving legal matter with different
standards applicable in different states, our local merchant
acquirers -- banks -- are best suited to make any determination
about potential illegality."
So, for now, most legal purveyors of pot still must deal in
cash, which carries other risks.
"For many businesses, this means storing hundreds of thousands
of dollars in personal safes, carrying sacks full of hundreds to
the state Department of Revenue in order to pay taxes, and looking
for unusual sources of startup revenue," the Marijuana Policy
Project, a Washington, D.C.-based group that lobbies on behalf of
reforming marijuana laws, said in a statement. "For some
businesses, the added burdens have forced them to close shop."
Online gun sales:
A key element of the credit card industry recently began refusing
online transactions involving legal gun sales
. Authorize.net, owned by Visa, last September severed its
relationship with the nation's largest online gun purveyor -- the
Hyatt Gun Shop of Charlotte, N.C. Authorize.net told Hyatt
officials that their operation violated its "acceptable use
guidelines." Other online gun retailers also were cut off.
Authorize.net is one of the nation's leading "payment gateways,"
operations that securely link online merchants to credit card
issuers. The gateway's acceptable use guidelines prohibit, among
others, transactions involving any product or service that is
unlawful, anything obscene or pornographic, and anything associated
with illegal gambling operations, illicit drugs and "the sale of
Representatives of Authorize.net and Visa have declined to
comment specifically on the decision to terminate operations
between Authorize.net and online gun shops, though they note that
Visa itself will still handle payments for such transactions -- if
they come through a different payment gateway. And there is no
problem using credit cards for legal purchases at brick-and-mortar
Still, the development has infuriated online gun merchants and
their customers, some of whom have organized a boycott of any
business that displays an Authorize.net logo.
Under federal law, credit card companies now are prohibited from
processing transactions connected to online gambling, including
those related to the immensely popular online poker operations.
Unlawful Internet Gambling Enforcement Act of
required card networks and banks to navigate a swamp of conflicting
definitions and rules if they wanted to do business with U.S.
online gambling sites. Most decided, the heck with it -- we're just
going to cut off the gambling sites.
The law took full effect in 2009, and it had an unintended and,
for some Americans, financially disastrous effect. It pushed many
online gamblers into using offshore gambling sites, which soon were
defrauding unprotected U.S. gamblers
out of hundreds of millions of dollars.
Now, members of Congress and state lawmakers are working --
sometimes at cross purposes -- to make sense of a
chaotic knot of online gambling rules
from federal and state laws and regulatory agencies. Some measures
would continue the ban on credit card use, though others would
authorize online gambling credit card transactions -- under tightly
"It is far better for the players' financial fate if the safety
and security of Internet gaming transactions are in the hands of
the U.S. banking system and the responsible and regulated American
gaming corporations," John Pappas, executive director of the Poker
Players Alliance, which claims more than 1 million members,
told a congressional committee
last month. "If anything, a prohibition would make the likelihood
of money laundering or other fraudulent activity far greater
because it would be forced underground without any oversight or
The operation that takes pride is publishing secret documents
leaked from various governments and other entities around the
world, WikiLeaks was largely crippled in 2010 and 2011 when
MasterCard, Visa and American Express stopped processing
The card companies said WikiLeaks, which does its work in the
service of what it calls "transparency," was engaging in illegal
activity and they would have no part of it. "MasterCard rules
prohibit customers from directly or indirectly engaging in or
facilitating any action that is illegal," spokesman Chris Monteiro
told CNET at the time.
WikiLeaks and its supporters intermittently found ways around
the ban, and the operation's website now provides an online
donation form that encourages credit card donations, though with a
touch of mystery.
"Since late 2010, credit card donations to us have been blocked
by Visa and MasterCard, in an effort to suppress our public
interest publishing activities," WikiLeaks says in a statement
concerning "the banking blockade against us."
"The blockade is still in effect, but as of summer 2012, there
are ways around it ... ," WikiLeaks says. "We have won several
victories against the banks in the courts, and we will continue to
fight the banking blockade."
How will this all play out? No one seems to know, though
American Express and presumably other credit card companies believe
their first responsibility is to the customers who use their
"High-risk industries account for high levels of card member
credit losses and customer service disputes," said Chao, the
American Express spokeswoman. "Prohibited card acceptances for
various industries are designed to protect our card members by
limiting fraud and unfair practices, among other things."
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